Grand Bargain Preserved, with New Barriers to Development in “At-Risk” Neighborhoods

Weeks of heated behind-the-scenes negotiations ended in compromise over the affordable-housing provisions of Mayor Ed Murray’s Housing Affordability and Livability Agenda (HALA) late Monday afternoon, as Murray announced an agreement that will maintain the current affordability requirements in South Lake Union and downtown, impose affordability mandates (also known as mandatory housing affordability, or MHA) that vary based on how much additional development capacity is being added, and create additional hurdles for developers looking to add housing in moderate-income, racially diverse areas like the Central District.

I wrote about the variable affordability requirements a couple of weeks ago. Basically, the new rules say that in areas where zoning capacity (potential density) is being increased more than in other areas (say, a single-family block where three-story buildings are now permitted), developers have to provide more affordable housing or pay more into an affordable-housing fund. The logic is obvious—developers who take advantage of greater height increases should pay more for that privilege—but also flawed: Penalizing developers for building density in densifying areas arguably discourages development in those areas. At any rate, developers at the negotiating table these past few weeks clearly decided they could live with the higher fees, and agreed to the new formula.

More contentious were the fees and performance requirements (the amount of housing that has to be affordable, and at what level) in downtown and South Lake Union, which were negotiated as part of a separate process than the rest of HALA back in July, and are generally lower than what the fees and performance requirements will be in other parts of the city. (The Grand Bargain stipulated that the requirements downtown and in South Lake Union under MHA would be no greater than what was already required under the previous affordability program, known as incentive zoning. It was considered a Grand Bargain, in part, because social-justice advocates agreed to leave the downtown and South Lake Union requirements untouched).

Despite the signed agreement, Sage and other advocates reportedly wanted to increase the fees in those two neighborhoods significantly, to as much as double the rates both sides agreed to, which could have ended the Grand Bargain and blown up the coalition that came up with the agreement over a year ago. (Opponents of the Grand Bargain, and of MHA in general, have predicted this would happen all along.) After weeks of discussions, the two sides came to an agreement, and the fees will remain the same.

One thing that will change, at the behest of lefty activists and their allies on the city council, is the affordability requirement in neighborhoods whose residents are supposedly at a “higher risk of displacement” from new development—that is, areas with more black and brown people, fewer job opportunities, and lower housing costs. In those areas, developers will have to preserve as much as 11 percent of new units for housing affordable to people making 60 percent or less of Seattle median income, or pay as much as $32.75 a square foot into a city-run affordable housing fund—the same fee as areas of the city that are being upzoned the most.

The change is supposed to “increase affordability in areas at higher risk of displacement,” according to Murray’s proposal. But developer advocates have argued that by making it much more expensive to build in areas like the Central District, the Rainier Valley, and the International District, the city will make it much less likely that new projects like Vulcan’s 570-unit, 6-acre development at 23rd and Jackson, which is vested under pre-Grand Bargain standards, get built. (Another large development, at 23rd and Union, has also been permitted under the current rules.)

That means not just less “gentrification” (another term for providing amenities like shops, modern grocery stores, and cafes in low-income neighborhoods). It also could mean less low-income housing. Vulcan plans to make 20 percent of the units in that project affordable for people making up to 65 percent of median income, under the Multifamily Tax Exemption program that keeps units affordable for 12 years. An 11-percent, 75-year affordability requirement—what could be required under the new plan Murray proposed yesterday—will be a much tougher sell.

Vulcan, of course, was the developer heavyweight at the Grand Bargain table. The fate of another proposed project, at 23rd and Union, is unclear.

Seven members of the council—all but Lisa Herbold and Kshama Sawant—have signed off on the mayor’s proposal.

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